Bernanke announced on September 13, 2012 a massive “money printing” program – QE3 – that will increase the money supply, help the large banks, create more commodity price inflation, and lower the standard of living of most of the middle class in the United States. Read what other authors had to say about QE3: We Have Been Warned! – Part 2

It is relatively easy to predict further commodity price inflation and that hard assets, not paper assets, will help protect purchasing power. But it is much more difficult to project where else this money printing leads and to what extent a crash is inevitable. What is the endgame? Will it be another financial crash such as in 2008? Or will it be a more destructive financial and economic crash that causes a severe but temporary disruption in the delivery of goods and services?

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Jason Hamlin wrote regarding the United State national debt, as well as the sovereign debt of most other countries. His conclusions were:

“Raising taxes will not solve the problem. We could raise the tax rate to 100% and the government would still not be able to get out of debt.

Cutting spending (austerity) will not solve the problem. We could cut every non-essential government service and the government would still not be able to get out of debt.

Inflating away the debt will not solve the problem in the long term. It will only kick the can down the road, exasperating the final crisis and making everyone pay for the poor decisions of a small group of lenders.

Solutions

So then, what is the solution to the debt crisis in Europe, the U.S. and around the globe?

Michael Pento wrote regarding “The Bernanke Cliff, and loss of faith in the US dollar, thanks to massive money printing from Quantitative Easing:”

“However, there is indeed a real fiscal cliff that the United States is racing towards. It’s the very same cliff that Europe has already dived over. That cliff is based on the collapse of our debt and dollar markets, resulting from the lost faith on the part of international investors. And that loss of faith is being greatly facilitated by our Federal Reserve.” (The Bernanke Cliff)

Charles Hugh Smith wrote regarding phantom assets and the self-destruct sequence of financialization. He does not believe that more debt will reflate a collapsed asset bubble that was initially caused by excess debt backed by phantom or minimal-value assets.

“But there is another dynamic at play: a self-destruct sequence triggered by central bank and Central State efforts to reflate asset and credit/leverage bubbles. All central bank and State policies aimed at driving capital into risk assets boil down to reflating phantom assets purchased with debt by issuing more debt that is based on newly issued phantom assets.” (Financialization’s Self-Destruct Sequence)

Vincent Cate writes on hyperinflation. (Yes, it could happen here in the United States!)

“Hyperinflation happens when debt is over 80% of GNP and deficit is over 40% of government spending. The US is at or near these numbers, so the danger of hyperinflation is real. What happens is that the more the central bank prints money and buys bonds the less other people want to hold bonds. But the less other people hold bonds, the more the central bank has to buy them so the government has enough money to spend. You get a positive feedback loop or death spiral… There have been over 100 cases where the combination of a government spending way more than they got in taxes and a central bank printing money and buying their debt to help them out (often after changes in law or leadership) caused hyperinflation. What is the core difference in the US government or US central bank that anyone could think sets them apart from these 100 cases?” (Mish on Hyperinflation)

Egon von Greyerz is very concerned that worldwide governments have been allowed “to create endless amounts of worthless paper money and the resulting credit bubble has created a world debt exposure of over US$ 1 quadrillion (including derivatives)… Few people realize that this wealth is totally illusory and will implode considerably faster than the time it took to create it.”

He also states that:

“Gold reveals governments’ deceitful actions in destroying the value of paper money and the wealth of nations. This is why most Western governments dislike gold. Because gold tells the truth and the truth is that since August 1971 the US dollar has declined 98% in real terms….. The final fall of currencies will be as a result of the unlimited money printing that governments will embark upon in the next few months in order to endeavor to “save” the world economy. But money printing does not save anything. It just exacerbates the situation. You cannot ever become debt free by issuing more debt and you cannot create prosperity with worthless pieces of paper.” (Unraveling Why A Fed President Just Suggested Doubling QE3)

“How does all this end? Like it has every other time in history, with a final destruction of the currencies involved. That’s my best guess.

This is why I view all of the QE efforts to date, and those that will certainly follow, not only with suspicion but as a series of unforgivably narrowly-conceived efforts that will combine into one of the most colossal failures ever experienced by modern man.” (The Trouble with Printing Money)

Nick Barisheff discussed mainstream media and gold. He stated:

“When you start looking at the history of currencies, there isn’t one example in human history where fiat currency didn’t go through a hyperinflation and complete collapse. Not one! You need to get acquainted with topics like money, how the Federal Reserve and fractional reserve system works, how currencies are being debased and the roles of interest rates and inflation.” (Why Mainstream Media, Main Street And Institutions Fail To See The Benefits Of Gold)

John Rubino wrote about QE3, the Kondratieff Long Wave, and the Kondratieff Winter. He concluded by saying:

“So here we are. The conditions for a global catastrophic failure are in place. Snow (in the form of trillions of new dollars and euros) is falling. There’s no way to know which dollar (or which external event) will start the avalanche, but without doubt something will.” (The Long Wave Versus the Printing Press: Central Banks Go All-In)

Nick Barisheff discussed the destruction of the currency and the rise of gold in his October 4, 2012 article. In that article he stated:

“What’s interesting though is the Basel III framework for banks and in particular the amounts of reserves that banks have to hold. The rules are changing as of the 1st of January 2013. The reserves at the banks go from 4% to 6%. In addition, the Bank for International Settlements (BIS) has proposed to let gold become a tier I asset for commercial banks, which means that it counts as 100% collateral rather than 50% the way it is now. In other words, it’s considered a risk free asset like cash and treasury bills. That’s going to change the picture considerably, in particular for the people who argue that gold is risky. Try to imagine the potential effect of this – the BIS coming out shortly to confirm that gold is a risk-free asset.” (The Destruction Of Currency And Rise Of Gold)

Conclusion

We have been warned! Respected economists and critical thinkers have raised the warning flag – QE3 and subsequent bond monetization by the Fed places the United States at risk of a financial collapse and a hyperinflationary depression. Yes, it is possible in the United States. In fact, many other writers have made a compelling case for the mathematical inevitability of such an inflationary crash. We have been warned.

In 1980 did the gold bubble rally forever? It rose to about $850, and then it crashed.

In 1990 did the Japanese Nikkei 225 Stock Index bubble rally forever? It rose to about 39,000, and then it crashed.

In 2000 did the NASDAQ 100 stock index bubble rally forever? It rose to about 5,000, and then it crashed.

In the 2nd decade of the 21st century, will the sovereign debt and fiat currency bubble expand forever? Or is a crash both inevitable and imminent?

Will living conditions for most Americans deteriorate after the value of the dollar has imploded and commodity prices have tripled, or worse, and those prices have increased by far more than wages?

Given that politicians and the Fed have created this economic mess, is it wise to expect that their policies and reassurances will bring the people of the United States and its economy back to prosperity and economic sanity?

The economy and stock market may suffer a dramatic downturn after the 2012 Presidential election. Similarly, gold and silver will soon finish their current correction and begin another rapid rise to all-time highs.

3 thoughts on “We Have Been Warned! – Part 3”

There is a solution that has been overlooked and I suspect that it’s only because this solution is grass roots and market driven. I have to wonder why MSM and even internet media seem to exhibit tunnel vision when it comes to economic solutions ? Where is it written that economic solutions must be top-down ?

The trick to drawing off debt is to make sure you have some form of liquid currency that is debt-free in order to take its place. The market monetization of precious metals, happening daily, allows for debt-free liquidity to support economic activity, but does so with no associated new debt. This debt-free liquidity allows existing fiat based debt to be withdrawn (not redistributed) and to return to the nothingness it was created from.

Keep in mind that Gresham’s Law, as it may have pertained to FIXED gold systems of the past, no longer applies to bullion that has floating values that rise. The liquidity problem with past gold money systems was not the gold. It was the FIXED values placed upon bullion. Real-time has been key to the re-monetization of very liquid precious metal money.

If I read you correctly, you are suggesting something like revaluing gold at perhaps $20,000 per ounce. I’m in favor of it, but the powers-that-be will not be until they have correctly positioned themselves.